Apple is not a videogame company. So how come that in fiscal year 2019 it ranked more profits in the videogame industry than Microsoft Corp. with his Xbox, gaming giants such as Nintendo Co. and Activision Blizzard Inc., and PlayStation maker Sony Corp., all combined? (Wall Street Journal)
The true weapon responsible for the $8.5 millions operating profits is the App Store, Apple’s digital marketplace where other companies and developers can sell and distribute their games, for a ‘small’ fee equal to 30% of their sales.
Useless to say that competitor right now do not have many alternatives to gain access to the huge market of iOS and need to surrender to the tech giant.
Once again, this shows how fundamental is the role of platforms in today’s economy, and for digital companies in the first place: products’ quality has been relegated to a secondary role, and competition now consists in a war for attracting and retaining users. Being able to restrict the access to such a wide customer segment, put Apple in a dominant position with respect to his rivals.
Apple’s CEO Tim Cook certainly does not overlook this opportunity, and he introduced in the new iPhone 13 Pro screen upgrades aimed at giving a smoother video experience, a feature particularly appealing to gamers.
However, even a market leader like Apple cannot afford to relax, and continuous threats are arising from competitors such as Facebook Inc., Microsoft and “Fortnite” maker Epic Games Inc., heavily investing in what appear to be the future technological frontier: virtual reality.
If they were to develop such technology, they could be able to overcome the App Store gates, and appeal to a much wider market: many different digital activities (search, shopping, live events, …) would indeed be transferred to the videogame’s world, appealing to a much wider user base.
Industry global revenue from videogames is expected to almost double to $198 billion in 2024 compared with 2016, according to estimates by technology consulting firm Activate Inc., with mobile games driving the growth with $103 billions of expected revenues in 2024 (as estimated by Activate Inc consulting firm).
An additional risk that could disrupt Apple’s role as gatekeeper between the gaming world and its more than 1 billion iPhone users is represented by legislation, court order or regulatory action.
In August 2020, Epic Inc filed a lawsuit against Apple claiming the company held an improper monopoly over distribution of software on its mobile devices and forced developers to use its in-app purchasing system.
Even though Apple claims about the fairness of his fees and the existence of alternative ways for users to play games were accepted, the judge ordered the tech giant to let developers inside their apps advertise alternative, cheaper payment methods that exist outside of Apple’s App Store.
To conclude, power in the digital industry comes from the ability to reach users, and most of all to prevent rivals to reach those users. However, this environment is very dynamic and, thanks to the exponential growth and expansion of its actors, increasingly scrutinized.
All players, even a giant like Apple, need to keep innovating, to avoid the risk of losing their relevant position as fast as they gained it.
Reference: https://www.wsj.com/articles/apple-doesnt-make-videogames-but-its-the-hottest-player-in-gaming-11633147211?mod=business_lead_pos1
